Stagnant global trade and slow investment with increasing political instability has created a challenging 2016 for the entire world economy. Economic growth reached only 2.3%, the lowest since the global financial crisis in 2009. The advanced economies continue to struggle with low growth and low inflation in the context of increasing uncertainty about policy direction, gradually decrease in investment and productivity. However, developed countries are expected to recover the economy, achieving an average speed of 1.8% in the near future.
The major political changes in 2016 had a major impact on the global economy, not to mention Proposed referendum on United Kingdom membership of the European Union – Britain leave the EU Brexit event in June and the results of the US presidential election in November. Global financial markets were rocked several times in the first half of 2016 but then recovered. The US economy has shown signs of recovery, while the euro zone hit bottom, the Chinese economy fell slightly, while Japan continues to face deflation. Commodity market rebound in late 2016.
Vietnam’s economy in 2016 grew at 6.21%, lower than the set target (6.7%). Decline in the agricultural sector and the mining industry is the main reason leading to slower growth of the whole year. However, detailed manufacturing index showed signs of recovery in 2017. Exports grew slowly and did not achieve its objectives because of influence from world commodity prices. Foreign investment rose sharply in the first 3 quarters but slowed in the end of the year; exchange rate is stable thanks to policy on adjusting the exchange rate of the central bank as well as the increased foreign exchange reserves. Consumer price index (CPI) increased by 4.74% over the previous year and achieved its objectives. The largest contributor to this growth rate was the price adjustments of state controlled goods and services including health services and school tuition. Although the SBV maintained its expansionary monetary policy, the credit growth was relatively disappointing.
Plans to reduce the state budget deficit in 2016 failed when the state budget deficit reached 5.52% of GDP in the year, much higher than the set target of 4.95%. National Assembly has informed its decisions to adjust local governments’ share in tax revenue. Meanwhile, public debt increased rapidly and approached the ceiling by the end of 2016.
Vietnam to engage in free trade agreements in recent years, such as AEC, TPP, EVFTA … will be an opportunity to promote exports through tariff preferences and at the same time, take advantage of the resources provided aid, FDI from outside. However, domestic enterprises will face the pressure of fierce competition as well as the strict technical barriers of the importing countries. However, the fate of the TPP has become very fragile after the US Presidential elections. On 11/21, President-elect Donald Trump announced his first job after taking the office is withdrawing the US from the TPP. In the fact that TPP is more likely to be “dead”, so many people move their expectation into RCEP. RCEP (Regional Comprehensive Economic Partnership) is a free trade agreement towards high quality objectives to establish comprehensive partnership between ASEAN with six partners, including China, Japan, South Korea, Australia, New Zealand, and India, also known as ASEAN + 6. RCEP is expected to include the liberalization of trade in goods, services, investment, economic cooperation and the technical, intellectual property, competition policy and dispute settlement.
Overall, Vietnam’s economy in 2017 is expected to achieve growth of around 6.3% since the Government continue to focus on macro-economic stability and improve the business environment.